Business Expenses

tax exemptions and preferences

The effective tax legislation provides numerous tax incentives to the manufacturing companies, including those implementing projects in accordance with the Programs of Localization, Service Sector Development, and others. The array of the incentives is very broad:from complete exemption from all taxes and payments to reduced tax rates, exemption for the entire period of operation or for several

Types of domestic

 

 

 

companies, organizations and institutions eligible

Object of exemption

Type of incentive

Incentive period

for tax incentives

 

 

 

CORPORATE TAX

Investment funds

Profit used for purchasing shares of privatized companies

Exempt from the tax

Unlimited

Oil&gas joint ventures with foreign companies

Profit

Exempted from the tax

7 years after starting production of oil or gas

Funds for expansion of core businesses through new construction, reconstruction of buildings and premises used for manufacturing purposes, as well as fore repayment of loans for those purposes, net of depreciation

Taxable income is reduced for 5 years starting wth the taxation

period, when aforementioned costs were borne or since start of the operation of the equipment

Taxpayer companies                                            accrued in the respective tax period

The funds are deducted from the taxable profit, however they may not exceed 30% of the latter


 


 

Profits generated by the urban passenger services (except taxi including shuttle service)

Exempted from tax

For period of operation

 

Dividends channeled to the authorized funds (charter capital ) of the legal entity, which generated these profits

Tax exempt

For entire period of operation

Companies - exporters of goods, works, services (regardless of the location of works and services) generating hard currency

Profits

Tax rate is reduced by: - 30% if exports account for 15-30% of output; - 50% if exports account for 30% and more of the output

Unlimited

Newly established agroindustrial firms

Profits

Exempted from this tax on the condition of earmarking the funds

5 years after state registration

Service companies (except for commercial banks)

Income from the services paid by debit cards

10% discount from current tax rate

Starting 1.10.2006

Companies implementing projects under Localization programmes

Profits from the products manufactured under localization projects

Exempted from this tax on the condition of earmarking the funds

Up to 1.01.2014

VALUE-ADDED TAX

Transfer of fixed assets, intangible assets, and buildings under construction as a contribution

Fixed assets, intangible assets, and buildings under construction granted as a contribution to the authorized funds

Exempted from this tax

Unlimited

Service delivery

Insurance, reinsurance, and co-insurance services by the professional players in the insurance services market

Exempted from this tax

Unlimited


Types of domestic

 

 

 

companies, organizations and institutions eligible

Object of exemption

Type of incentive

Incentive period

for tax incentives

 

 

 

New agroindustrial businesses

On the condition of earmarking the funds

Exempted from this tax (except VAT on imports)

5 years after state registration

Manufacturers of prosthetics and orthopaedic devices for the disabled

Prosthetics and orthopaedic devices for the disabled as well a the services for maintenance of prosthetics for the disabled

Exempted from the sales tax on its products (works, services)

Unlimited

 

Goods (works and services) procured by the legal entities

 

 

Grant recipients

using the loans and grants provided by international and foreign government and government financial institutions based on international treaties of Uzbekistan

Exempted from the sales tax on its products (works, services)

Unlimited

Farm producers

In-house farm products

Exempted from the sales tax on its products (works, services)

Unlimited

 

Property transfered under investment commitments

 

 

 

based on the contract made between the investor and

Exempted from the sales tax on

Unlimited

 

authorized government body for management of state

its products (works, services)

 

property

 

 

PROPERTYTAX

 

Leased equipment

 

For the period of lease agreement

Taxpayer companies

New equipment in operation. In case of sales or free

 

 

transfer of new equipment within 3 years after its

Taxable base is reduced by

 

 

acquisition (imports), this benefit is annuled along with

the value of aforementioned

5 years

 

reinstating the commitments related to the payment of

property

 

 

the property tax for entire period of benefit

 

 

 

Property. This benefit is not effective for the companies

 

 

New businesses

established as reorganized legal entities as well as legal entities operating on the territory of other companies utilizing the equipment leased from these companies

Exempted from the tax

2 years after state registration

Companies exporters of own products (works, services) except raw materials

Property

Tax rate is reduced by: - 30% if exports account for 1530% of output; - 50% if exports account for 30% and more of the output

Unlimited

New agroindustrial businesses

Property, on the condition of earmarking the funds

Exempted from this tax

For 5 years after state registration

Companies implementing projects under Localization Programs

Main production assets used for manufacturing localized products

Exempted from this tax on the condition of earmarking the funds

Up to 1.01.2014


Types of domestic companies, organizations and institutions eligible for tax incentives

Object of exemption

Type of incentive

Incentive period

LANDTAX

New agroindustrial businesses

Land plots

Exempted from this tax on the condition of earmarking the funds

For 5 years after state registration

New smallholders

Land plots

Exempted from this tax

2 years after state registration

Businesses closing voluntarily

This exemption is not applicable in case of failure to complete voluntary liquidation within legally mandated timeframe or halting the procedures of liquidation and restarting operations, while the amount of tax is levied for the entire period of application of the exemption

Exempted from this tax

Since the notice of the decision on voluntary liquidation f the body, responsible for state registration of legal entities

Land plots designated for construction of sites included in the Investment Programme of Uzbekistan

Land plots

Exempted from this tax

for entire period of construction;

Land plots, newly developed for farming

Land plots

Exempted from this tax

For the period of development works and five years thereafter

WATER TAX

Water users -recipients of water from the legal entities, which paid the water tax

Volume of water received from the legal entities, which paid the water tax

Exempted from this tax

Unlimited

Businesses-legal entities closing voluntarily

This exemption is not applicable in case of failure to complete voluntary liquidation within legally mandated timeframe or halting the procedures of liquidation and restarting operations, while the amount of tax is levied for the entire period of application of the exemption

Exempted from this tax

Since the notice of the decision on voluntary liquidation f the body, responsible for state registration of legal entities

Water users re-using the water, which was paid for in primary use

Volume of water, which was paid for in primary use

Exempted from this tax

Unlimited

Health institutions

Underground mineral water, used for treatment purposes except water sold in the retail network

Reduction of taxable base

Unlimited

 

 

Types of domestic

 

 

 

companies, organizations and institutions eligible

Object of exemption

Type of incentive

Incentive period

for tax incentives

 

 

 

Manufacturers of medical drugs

Water used for producing medical drugs

Reduction of taxable base

Unlimited

 

Underground waters pumped out to prevent harmful

 

 

Taxpayer-companies

impact on the environment except water used for industrial and technical needs

Reduction of taxable base

Unlimited

 

Underground waters pumped out of shafts for mining of

 

 

Taxpayer-companies

minerals and pumped back into the ground for maintain underground pressuure except water used for industrial and technical needs

Reduction of taxable base

Unlimited

Taxpayer-companies

Water used for leaching salinized farmland

Reduction of taxable base

Unlimited

Source: Legislation of Uzbekistan, www.lex.uz

Also enterprises attracting direct private foreign investment and specializing in production of radio electronic devices and production of computers' components, light industry, silk industry, industry of building materials, Industrial production of poultry meat and eggs, food industry, meat and milk industry, processing and preserving of fish and fish products, chemical and petrochemical industry, medical industry and production of medicals for veterinary use, production of packaging materials, construction of power plants based on alternative sources of energy, coal industry, Production electro-ferroalloy and hardware for production purposes, machinery and metalworking, machine tool and instrument industry, glass and porcelain industry, microbiological industry, toy industry are exempted from payment of profit tax imposed on legal entities, property tax, tax imposed on improvement and development of social infrastructure, unified tax payment imposed on micro companies and small enterprises, as well as from mandatory deductions to the Republic Road Fund (Decree of the President of the Republic of Uzbekistan #UP-3594 dated 11.04.2005).

Aforesaid tax privileges are granted on condition that a volume of direct foreign investment is as follows: 1) from USD 300 ths to USD 3 mln - for 3 years; 2)over USD 3 mln to USD 10 mln - for 5 years; 3) over USD 10 mln - for 7 years.

Abovementioned tax-related privileges apply in the following cases:

-location of enterprises in all region of Uzbekistan, with the exception of Tashkent and Tashkent region;

-direct private foreign investment by foreign investors without providing a guarantee of the Republic of Uzbekistan;

-a share of foreign participants in an authorized capital of the enterprise should be not less than 33 per cent;

-foreign investment in the form of freely convertible currency or up-to-date manufacturing equipment;

-  use of not less than 50% of income derived as a result of granting of aforesaid privileges within the whole period of their application for reinvestment for the purpose of further development of the enterprise.

MFERITMEDEF InternationalInternational Business CenterGov.uzPress ServiceOliy MajlisUzASARIO